Top 20 Chinese Pesticide Companies in 2017: business picking up, level of growth further differentiated

Since 2017, the prices of global farm products from the demand side have shown signs of rebounding, after reaching the bottom. Also the stocks of agrochemical giants have been nearly expended, as another turn in the inventory cycle is about to begin . On the supply side, the implementation of intensified structural reforms and stringent environmental compliance regulations have led to an optimized industry distribution. As such, the level of business achievements are further differentiated, where productions and achievements of dominant enterprises have grown substantially.

The sales reports by the Top 20 reveal the a rise of the entry level into the Top 20 of Yuan2.156 billion, which is Yuan662 million more than last year's Yuan1.494 billion, registering a 44.31% increase year on year. In 2017, only one of the Top 20 companies had a negative growth, while in 2016 seven companies suffered negative growth.

There was a significant change of ranking in the first 10 companies in the Top 20. Sanonda’s acquisitions of large companies are regarded as a “snake swallowing an elephant”, as the old saying goes. After these acquisitions, Sanonda achieved a blowout growth, as high as 1374.81%, and ranked first with sales of Yuan22.034 billion, having become the first Chinese pesticide production enterprise achieving sales of above 10-billion Yuan. Nutrichem and Rainbow Chemical ranked the second and the third respectively with the sales of Yuan6.083 billion and Yuan5.047 billion.

Besides Sanonda, other companies that have achieved above 50% growth include Yangnong Chemical, Lianyungang Liben Crop Science, Lier Chemical and Anhui Guangxin, of which the sales of Lianyungang Liben rose to Yuan3.567 billion from Yuan1.966 billion in 2016, 81.42% higher year on year, which is a very impressive achievement.

Business growth is stable, as backed up by strong home-grown driving force

All the top 10 ranked companies in the Top 20 reported sales growth, of which Nutrichem, Rainbow Chemical, Red Sun, Yangnong Chemical, Wynca, Lianyungang Liben, Lier Chemical, Lianhe Chemical Technology, Jiangsu Sevencontinent and Anhui Guangxin saw growth of above 30% . Apart from the reasons for the warm up in the pesticide industry and prices rebounding for pesticide products, an analysis of the annual reports of Top 20 companies reveals the strong home-grown driving force of these companies to be an important factor in the achievements of these companies.

●Buildup of a Global “Fast Market Access Platform”

The sales for Rainbow Chemical in 2017 reached Yuan5.047 billion, 34.54% up year on year, which enabled the company to rank third in the Top 20. It is, however, noted that the company ranked first among Chinese top exporters in 2017, attributable to the steady progressing of its “Fast Market Access Platform”, by which Rainbow Chemical moved towards the upstream of the global industrial value chain. The company's products have been sold to over 50 countries and regions to compete with prime international brands, being referred to as a “hidden champion”. So far, Rainbow Chemical owns 49 wholly-owned or share-controlled companies, and has established the Fast Market Access Platform in some 40 countries across Latin America, Asia Pacific, Africa and East Europe. The set-up of the Fast Market Access Platform will continue to grow in the future.

●Focusing on Intensive Cultivation of Industry Chain

In 2017, Red Sun focused on intensive cultivation of the industry chain, and the enrichment of its product line, having formed a “elementary raw material + intermediate + technical material + formulation + sale channel” competitive edge, particularly an internationally-advanced production ecosystem based upon “energy conservation and emission reductions, decrease in pesticide use and increase in the effect of application, upgrade and update of production, and a cyclic economic development”. The production ecosystem of the company encompasses its innovative biochemical pyridine base, biochemical VB3, biochemical imidacloprid, biochemical diquat, biochemical glufosinate, L-glufosinate, biochemical chlopyrifos and paraquat GW, which have greatly expanded the “green development and rapid growth” initiative of the company. Since 2017, stringent environmental compliance regulations were put in place after accidents occurred in a number of chemical factories, which led to shut downs or restrictions in the production of some raw materials, intermediates and pesticide technical, which resulted in price rise of raw materials and intermediates, having seriously affected the price of pesticide technical of downstream pesticide technical producers. Benefited by its complete industry chain deployment, Red Sun could achieve 37.26% sales growth in 2017.

●Localization and Internationalization Initiative

In early 2017, Wynca announced a “new 50-year program” to kick off its transformative development. At the end of 2017, results of the localization and internationalization initiative were reached – a significant growth of nearly 40% sales. An example is that Wynca Sunshine (Ghana), which is a new subsidiary of Wynca, seized the opportunities for procurement, production and marketing, to make preparations for supplies when local distributors in Ghana did not dare to make purchases for fear of rising prices. Thus, from February 2017, the forming and encapsulation workshops of the company started to operate at full load to prepare for full supplies in the coming selling season. Benefited by the advantage of localized production, the net profit of Ghana Sunshine was achieved beyond the expected outcome , which repeatedly rose.

●Set up of Technical Barricade

Lier Chemical utilized its technical advantage to have solved the difficulty in the control and the scale up associated with the Grignard Reaction for production of glufosinate. Thus, Lier Chemical could develop a good command of key technologies of glufosinate production, having become the largest glufosinate technical producer in China. The Mianyang Phase 2 Production Line of the company was brought on stream in 2017, and has been upgraded constantly at a later stage, with its actual production capacity being now raised to 700 tons per month. The 10,000-ton annual glufosinate projects (7,000 tons in phase 1), 1,000-ton flumioxazin and 1,000-ton epoxiconazole projects have progressed smoothly, as planned. To compete with others in the glufosinate industry, the technical capability of Lier Chemical is, no doubt, a barricade keeping competitors behind. In 2017, Lier Chemical achieved a high growth of glufosinate technical, which increased as high as 55.67%.

Environmental regulation becoming more stringent, green development to become a focus of competition

In 2017, there was stricter regulation placed on the agrochemical industry. The stringent environmental compliance regulation not only speeded up the surviving of the fittest, but also forced transformation of business operations, which led to actions being taken by industry players to upgrade production capacity. In the course of transformative development, work safety and environmental compliance have become another important focus of competition, following competition in quality and cost. In 2017, enterprises that were stable and in compliance, have gained profitability from the prosperity of this business cycle.

In 2017, all key-account businesses of Yangnong Chemical increased, with sales of the company increasing 51.79% year on year, which enabled the company to rank fifth among the Top 20. Yangnong Chemical adopted the “environment-prioritized green development” idea to constantly strengthen environmental compliance via large inputs towards better environmental contributions. Yangnong’s Youjia subsidiary invested Yuan540 million in newbuild of high-standard waste gas, waste water and waste slag facilities, enabling it to achieve a life-cycle management of chemicals, as well as becoming a clean production leader towards sustainable development. The Youjia subsidiary has maintained its “green operation” status for 3 consecutive years, and has been awarded the “green factory” title by the Chinese Ministry of Industry and Information Technology.

Lianhe Chemical Technology saw 34.8% sales growth in 2017, rising to eleventh this year, from fifteenth last year. The company used the continuous hydrogenation, chlorination, condensation and oxidation techniques, which greatly reduced the risk in production. In addition, in the early stages of technical research, the company already utilized the environment protection-oriented research platform of the company to conduct research into waste treatment related to new projects, to ensure proper waste treatment to be put in place before new projects are constructed. In the meantime, treatment of existing facilities have been optimized, from time to time.

Jiangshan Agrochemical & Chemicals has been active in the promotion of cyclic economy and green development concepts, focusing on enhancement of the utilization of resources and the EHS management system. After study and research, Jiangshan Agrochemical & Chemicals has established a complete set of waste treatment technical portfolios, which are superior in waste treatment. The company made continued and proactive investment in work safety and environmental compliance, which provides the company with a healthy environment for production and business operations. The running load of major products could be maintained as stable, which secured its supplies and enabled a 9.38% sales growth in 2017.

Conclusion

From a global perspective, following the successful mergers between the world's top 6 companies, the second-tier and third-tier players are expected to embrace new business opportunities and growth potentials. Domestically, Chinese economic restructuring and transformation are apparently speeded up. The industry reshuffling is expected to further enlarge the differentiation of business operations for different companies, and the leading pesticide enterprises in China will have better chances of business growth. Under such circumstances, questions arise about how to strengthen the existing advantage and stimulate the home-grown driving force of enterprises? This would be something that the Chinese top 20 companies will have to do if they want to move forward and to exert more influence over the global agrochemical industry.